New Fannie Guidelines for Condos & Co-ops

Fannie Mae’s new and stricter underwriting guidelines for condo and co-op financing could add some delays to the application process - and could impact a potential buyer’s ability to obtain a conventional loan for either a new or established condo or co-op if the building/project does not conform. Please note that many banks have their own guidelines. Therefore, the Fannie Mae guidelines may not apply to all condos and co-ops.

I. Lenders are now required to assume more responsibility for reviewing the finances of condo and co-op associations. Under the new guidelines, Fannie Mae requires that lenders perform full scale reviews of most condo and co-op loans (vs the “spot reviews” that lenders performed in the past).

These full-scale reviews will require lenders to review the condo or co-op association’s projected budget to verify the following four essential association budgetary items:

1. The association has an “adequate” budget.

2. The budget contains a line item allocating ten percent (10%) of annual revenues for the association’s reserves.

3. The association has available funds equaling the deductible under the association’s master insurance policy.

4. No more than 15 percent (15%) of the common area fees are delinquent by more than one month.

Note: Increased insurance costs have resulted in associations increasing their insurance deductible amounts to reduce annual premiums. Insurance deductibles can be quite substantial. Fannie Mae does not require a separate budget line item for insurance deductibles, but the potential cost of deductibles must be accounted for in the budget. Insurance deductibles may be included in the reserve fund or may be a separate item. In either case, the lender must determine that the project has the ability to fund insurance deductibles

II. Fidelity insurance issued in the name of the condo or co-op will be required for condos or co-ops with 20 or more units, ensuring that homeowner association funds are protected. The amount of fidelity coverage must be equal to three months of assessments/maintenance fees.

III. No more than 10% of a project can be owned by a single entity.

IV. No more than 20% of a project can consist of non-residential space.

Content Resource: Fannie Mae Single Family 2009 Selling Guide (Chapter B4-2, Project Standards)

Courtesy of:

Lisa Ryll
Tel: 212.745.9039
lryll@manhattanmortgage.com

Dan Levitan
Tel: 212.318.9422
dlevitan@manhattanmortgage.com

The Manhattan Mortgage Company
555 Madison Avenue, 14th Fl., New York, NY 10022

Possible NYC Doorman Strike - Again!

I received this email from SEIU32BJ the union that represents doormen and other apartment building workers. Below is the email press release:

32BJ REJECTS RAB PROPOSALS FOR NEW DOORMAN CONTRACT

New York, NY--Today’s talks between 32BJ and leaders of NY’s Real Estate Industry made no progress on a new contract for 30,000 doormen and other apartment building workers. Instead of offering realistic proposals, the Realty Advisory Board (RAB) put forth unfair and unacceptable cuts to the health care, overtime and sick days that thirty thousand apartment building workers and their families rely on to make ends meet.

“Our message to the real estate industry is that with the recession now over, we need to be looking at leading economic indicators, not lagging ones when setting wages for the next several years, “said Mike Fishman, President of 32BJ. “With two straight quarters of economic growth behind us, and with steady growth expected for several more quarters to come, we need to be looking forward not backward.”

In the four years since the last contract, the consumer price index in the New York City area jumped 11.3%. The cost of milk, transportation and other everyday items is up more than 10%. Meanwhile, the $584 billion New York real estate industry -- which ranks first in the nation in overall occupancy rate in apartments and in average rent -- grew 28 percent.

“Apartment building workers and working New Yorkers should be able to live in the city where they work,” said Kyle Bragg, 32BJ Vice President for Residential Building Service Workers. “Because working families are an indispensable part of our economy and neighborhoods, we must make sure the city remains affordable to all New Yorkers.”

“The workers who keep apartment buildings running well and residents safe should be able to make ends meet in our city,” Fishman added. “This campaign is about more than a contract, it’s about keeping our city a place that working families can still afford to call home.”

“Working families like mine are being pushed out of the city,” said Felicia Estrada, a door attendant in Washington Heights. “We work hard every day so we can pay the bills and give our kids an education,” said Deon Fenton, a concierge on the Upper East Side.

“Despite the economic downturn, the New York real estate industry still boasts the lowest vacancy rate in the country and the highest average rent,” said Fishman. "This $584 billion industry surely has the capacity to ensure that the workers who maintain their buildings can support their own families.

Building worker labor costs, which are just eight percent of an owners’ operating costs, increased less than other operating costs."

“No one wants a strike,” said Bragg. “But we’re committed to do what it takes to get workers what they need.”

The negotiations for a new multi-year contract covering more the 30,000 apartment building workers began on March 9 between 32BJ and the Realty Advisory Board (RAB), an industry association representing most building owners in New York City. Failure to reach an agreement could lead to a strike directly affecting more than one million New Yorkers living in over 3,200 apartment, condo and co-op buildings in Manhattan, Brooklyn, Queens and Staten Island. The contract expires at 12:01 a.m. on April 21st.

With more than 120,000 members concentrated in eight states, 32BJ is the largest property service workers union in the country. For more information, visit http://www.standwithbuildingworkers.org/press

January - February Manhatan Market Snapshot

According to market data from Corcoran Group real estate, condominium unit sales closed increased 9 percent month-over-month, according to Corcoran's monthly market snapshot, while co-op sales went up 23 percent during that same time period.

While co-op sales prices were able to hold steady with an approximately 5 percent increase between January and February, condo prices were 4 percent lower in February 2010 than they were in the previous month.

Manhattan listed available inventory is 32% below its peak during March 2009, and now totals almost 8,400 units. Available inventory increased 6% from December 2009.

From December 2008 to January 2010 the median price of all properties (condos and coops) increased 17% from $700,000 to $820,000. Since September 2009, median prices per square foot has increased 34% from $800 to $1,071.

Median price per square foot is now at the same level it was two years ago. The rebound in prices is partly due to increasing sales of large luxury and new developments.

Local Law 5-A: Tenant Screening Agency Disclosure

Mayor Bloomberg Signs Legislation Requiring Realtors And Landlords To Disclose Contact Information For Tenant Screening Agency That Will Screen Rental Applicant

Introductory Number 5-A requires landlords, realtors, and others who rent residential properties to disclose the contact information of the tenant screening agency that they use to investigate potential tenants. Realtors and landlords often use tenant screening agencies to determine if a potential tenant has appeared frequently before housing court, but their determinations are not transparent; reports do not provide context on why the tenant appeared in court, and few tenants even know that such a report has been compiled.

"Introductory Number 5-A sheds light on this process. It requires that all rental applications contain contact information for the tenant screening agency that the landlord will use, as well as a disclosure of the rights afforded to potential tenants under State and Federal law. This information will also have to be posted in the offices of realtors and others who accept rental applications. This legislation will encourage tenants to exercise their rights to inspect their reports and ensure that the information contained therein is accurate